We investigate the competitive and cooperative performances of a supply chain with two
capacitated suppliers solicited by a customer who offers a new product procurement
suggestion. Suppliers have the option to accept or reject the new product offer according
to its profitability. In addition, suppliers have to decide on their base stock levels. We
classify suppliers as principal and secondary. The customer usually addresses demand to
the principal supplier at first. We consider two schemes: in the first scheme, the
principal supplier informs the customer about the demand ratio he wants to be allocated.
The customer allocates the remaining quantity to the secondary supplier. In the second
scheme, the principal supplier decides to respond to the entire demand and to subcontract
a part of it to the secondary supplier. In the competitive situation, we give conditions
that allow principal supplier to select the best scheme. We show that the new product
offer can be refused while it is accepted when suppliers cooperate. We present a profit
allocation policy under which collaboration is beneficial for the two suppliers.

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